A federally subsidized, low-interest student loan, awarded on the basis of financial need. The federal government does not charge interest on subsidized loans while borrowers are enrolled at an eligible school at least half time, during the six-month grace period, or during authorized periods of deferment. As part of the Federal Direct Loan Program, these loans are made directly by the federal government (rather than by a private lender) through participating schools. Compare Federal Stafford Loan.